Q&A: What is impact investing?

Impact investing is an exciting and rapidly growing industry powered by investors who are determined to generate social and environmental impact as well as financial returns.

How does it differ from ESG investing?

An ESG framework is a valuable tool that can be used to evaluate how certain behaviours negatively affect a company’s performance, and subsequently drive investing decisions. Most fund managers have now integrated ESG into their mainstream investment process.

Impact Investing takes an active approach to generating positive impact by investing in companies whose products and services integrate positive impact creation rather than just negative impact avoidance. Impact investing also adds another element: the ability to measure the effect of the investment.

How big is the market?

According to this year’s annual member survey from the Global Impact Investing Network (GIIN), respondents collectively manage over $502 billion in impact investing assets, a figure which serves as the latest best-available ‘floor’ for the size of the impact investing market. In 2017, this figure stood at $114 billion.

Do investors have to sacrifice returns to make an impact?

It’s a common misconception that investors have to give up financial returns to make a positive impact. A benchmark study published by Cambridge Associates found that impact investing can capitalise on long-term social or environmental trends to compete with, and at times outperform, traditional asset class strategies.

Indeed, impact investing favours companies that are trying to do good and run their businesses in a sustainable manner. Such companies avoid fines and other penalties; they have stronger relationships with their customers, suppliers and employees. Furthermore, they tend to operate in emerging sectors with high-growth potential.

EQ Positive Impact Portfolios

The EQ Positive Impact Portfolios are designed for investors who want their money to make a positive contribution towards society and the environment.

If you have a question about our Positive Impact Portfolios, we’d love to hear from you. Please email positive@eqinvestors.co.uk.